The Government will face further challenges to its flagship social care reform plans, commentators have warned.
In details released last week, the Government announced that where savers are entitled to means-tested Government support to pay for care, it will not count towards the new £86,000 lifetime cap. This means that those receiving state-funded help will face higher potential social care costs than previously expected.
Tom Selby, head of retirement policy at AJ Bell, says: “ While previously it was thought this money would count towards the £86,000 cap, the government snuck out an announcement saying only the amount that the individual contributes to care costs will count towards the cap.
“The proposal to tweak the rules for the social care cap will clearly only hit those with assets below £100,000 who are entitled to means-tested help and this alone will likely see Labour seize on the issue in the House of Commons.”
Selby believes the £86,000 cap will also raise further debate, given the relatively low savings many people have and the extremely limited set of social care products available in the UK.
He explains: “A cap on costs is clearly better than nothing – which is what we have had from successive Governments – but £86,000 remains a huge bill and paying it would be a significant challenge for most people.”
When the idea of a cost cap was first proposed by Andrew Dilnot a decade ago, there was the expectation that insurance products would be developed to cater for the market, but it remains unclear whether new products will be delivered or whether people will buy them.
Selby says policymakers will need to think carefully how they incentivise people to save for social care.
He adds: “This could be done through the ISA system, for example, through a product similar to a LISA – including an upfront bonus – but where withdrawals are only tax-free if used to pay for care.
“Policymakers could also investigate the idea of tax-free pensions access to pay for care, or using automatic enrolment to nudge people into saving for care alongside their retirement pot. In all cases, Government would need to be mindful of avoiding layering on extra complexity or undermining existing savings structures.”
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, concurred on the impact for the less wealthy. She said: “An awful lot of people will be paying far more towards the cost of care than they may have expected. Not everything you spend on care counts towards the cap, and even when you reach it, you may still need to keep paying for your care.
“In particular, this is a real blow for people with less income and savings, who will now have to spend far more of it on care before they reach the care cap, because any benefits they put towards the cost of care won’t be counted.
“There’s also bad news for those who want a higher level of care, because the local authority will assess how much care you need, and only this spending will count towards the cap. If you pay for additional care to make life less difficult, such as longer visits in your home, or amenities in your care home room, none of this will count towards the care cap.
“It’s also disappointing that even when it kicks in, the cap won’t cover daily living costs, so that even after families have spent £86,000 on care, they will still have to find another £200 per week for life – or until their assets run down to the level where they qualify for help.
“When someone needs care, the real financial strain comes from the fact that nobody has any idea how much care they will need, and how much it will cost. The reforms were meant to change that situation, but people still won’t know what the care will cost them.
“There was also horrible news for anyone who is currently receiving care, or who needs it between now and October 2023. None of the money you have spent before then will count towards the cap. Only cash you spend on care from that date onwards will be included. These people could still face catastrophic care costs before the government steps in.
“MPs are due to vote on this next week and it will be interesting to see if this causes the same amount of anger that the decision to suspend the state pension triple lock did earlier this week. We should expect to see MPs push back on behalf of their most vulnerable constituents.”
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